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Analyst says lower than expected pricing of Apple iPhone XR will hurt earnings in fiscal 2019

Analyst says lower than expected pricing of Apple iPhone XR will hurt earnings in fiscal 2019
In the days leading up to yesterday's "Gather round" event held by Apple at the Steve Jobs theater, several analysts went back and forth on their expectations of the pricing for the iPhone XR. This is the lowest priced model of the three handsets that were unveiled yesterday by Apple, and it carries an LCD display instead of the OLED panels found on the iPhone XS and iPhone XS Max. It also has a lonely single camera on back, and does not include 3D Touch.

Last week, Goldman Sachs analyst Rod Hall called for the 64GB iPhone XR to carry a price tag of $849. As it turned out, Hall was $100 too high as Apple announced yesterday that it will sell the unit at a starting price of $749 ($37.41/month over 24 months) when it is released on October 26th. The 128GB model will cost $799 ($39.50/month over 24 months) and the 256GB unit will run you $899 ($43.66/month over 24 months). Even though the iPhone XR will be launched five weeks after the other two models, most analysts see it selling the most among the three new 2018 phones.

Even though the lower than expected price for the iPhone XR will benefit consumers, Hall's main concern is how Apple's earnings will be impacted. In his opinion, the device will cannibalize iPhone 8 and iPhone 8 Plus sales, reduce the average selling price of the iPhone line, and lower Apple's earnings over the next fiscal year. The analyst sees this happening even if a cheaper iPhone XR price helps the company sell a slightly higher number of handsets than expected. Besides unveiling the new iPhone line-up, Apple eliminated lower priced phones like the iPhone 6s and iPhone SE. It also dropped the Apple iPhone X.

Going against the usual Wall Street mantra of "buy the rumor, sell the news," Apple's shares are up $5.13 today (2.32%) to $226.26.

source: CNBC

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